The US Federal Trade Commission blocks Microsoft/Activision deal

The reader will recall that in April I drafted a note on the UK CMA decision to block the Microsoft takeover of Activision. About a month later, in May 2023, the EU Competition authorities took a different view and permitted the takeover with conditions.

The deal is calculated at USD69Bn.

On 12 June, the USFTC sought a temporary injunction to block the takeover. In its filing, the USFTC said the two Corporations had ‘signalled’ the deal could be executed as soon as this coming Friday (16 June).

The filing continued that, unless the court intervened, the deal would produce a corporation that had the ‘ability and increased incentive to withhold and degrade Activision’s content in ways that substantially lessen competition’.

At the heart of the FTCs concerns is that Microsoft owns Xbox and Activision owns some very big games (Call of Duty included). Any deal could exclude other platform providers. Nintendo and Sony Group Corp could be denied access to these games. Consumers would be forced to use Microsoft platforms to play Activision games. Sony have expressed concerns.

The EU based its decision to allow the merger on undertakings given by Microsoft and Activision that the games would continue to be made available to other platforms for a fixed period of time post-merger.

Many will recall the fury of Microsoft to the UK CMAs decision. The reaction of their President (Brad Smith) to the FTC filing was more polite, not to say restrained;

‘We welcome the opportunity to present our case in federal court’.

Interestingly, the US FTC has its own in-house Administrative Judge who can grant such applications. The trial at the in-house FTC court will open on 2 August.

There is no getting away from the fact that Microsoft and Activision together would have a large chunk (a technical term) of the cloud gaming market. The problem is that the deal probably requires all three regulators to agree, but it definitely needs the FTC to sign off on the deal. The questions arise, what safeguards can the parties offer? And will these safeguards be sufficient?

My own view is that the USFTC is deeply troubled by the deal. I think the FTC was rather hoping the EU would do the job of blocking the deal. Now it has been forced to act and I do not think the FTC would have sought injunctive relief were it not minded to consider blocking the deal.

The EU was satisfied with the undertakings to make games available to competitor platforms. The CMA took a different view.

If I was pressed to guess on the FTCs decision, I would say that they are likely to block the deal. The combination of these corporations would give it a dominant position in the cloud gaming market, a market of increasing importance.

About the authors

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Jonathan Compton


Specialist in commercial disputes, banking and finance, regulatory and anti-trust/competition law.

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